The flawed structure of the Eurozone is coming back to haunt global leaders. The markets want the European Central Bank (ECB) to print money, but the golden rule applies: “He who has the gold makes the rules.” In Europe, Germany “has the gold”. Germany has seen what money printing can do and thus, is vehemently opposed to cranking up the printing presses.

Back in the United States, the Super Committee signaled over the weekend they may fail to reach a budget agreement before a fast approaching deadline.
Global growth is being threatened by a vast amount of uncertainty. If Europe tips back into a recession, which appears likely, it becomes even harder to access the bond markets at sustainable rates of interest.
From a technical perspective, as detailed in the video below, numerous concerns remain, including new bearish developments on the weekly chart of the S&P 500.

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

If the S&P 500 fails to hold between 1,191 and 1,209, a crack may appear in the door allowing stocks to revisit the October lows. A case can be made for support near 1,180 as well. If the S&P 500 can remain above 1,180/1,191, another push toward 1,240-1,280 cannot be ruled out. In either case, the odds remain in the bearish camp longer-term. Consequently, conservative/deflationary/bearish assets, such as bonds (TLT), the dollar (UUP), and shorts (PSQ), are attractive looking out several weeks to several months.

Other concerns remain:

As we outlined on November 4, the ratio of gold (GLD) to Tresuries (TLT) has yet to confirm the rally off the October lows.
The NASDAQ typically leads the S&P 500 during sustainable rallies. The NASDAQ has been a laggard in recent weeks (see article).
Copper has also failed to confirm the recent run by the bulls.
The European credit markets are showing signs of stress that exceed what we experienced in 2008.

If the ECB relents and decides to print money, all bearish bets are off. However, given Germany’s stance that appears unlikely in the short-term. Over the next few months ECB money-printing becomes more and more likely.

Ciovacco Capital Management

Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com

Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. As a registered investment advisor, CCM helps individual investors, large & small; achieve improved investment results via independent research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions. When looking at money managers in Atlanta, take a hard look at CCM.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

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